Report on impacts of data centers on Finnish electricity market

Finland’s national roadmap for data centers highlights their growing role in the data economy and energy system. To support this vision, AFRY Management Consulting analyzed how increasing electricity use and demand-side flexibility from data centers could impact the Finnish electricity market. The findings reveal that data centers not only drive demand but also offer critical flexibility—helping stabilize prices and support renewable integration.

Finnish Government-appointed rapporteur Veli-Matti Mattila has prepared Finland’s national roadmap for data centers to increase understanding of developments in the data economy and its impacts on and opportunities for Finland. To support Mattila’s report, AFRY Management Consulting modeled the impact of growing electricity use by data centers and potential demand-side flexibility on the electricity market. According to the report, data centers can quickly generate significantly more demand, but they also provide the opportunity to bring flexibility to the electricity market.

The electricity market in Finland needs more demand and more flexibility. Finland has excellent conditions to increase renewable electricity production on a market basis and at a competitive cost, but stagnant demand does not encourage new investments.

More flexibility is needed to balance the intermittent renewable electricity production. Data centers could quickly generate significantly more demand, but according to the report, they can also bring flexibility to the market. In addition to flexibility from their own electricity use, data centers also have substantial backup power plants, that could participate in the reserve market and, in some cases, provide significant benefits to the entire electricity system.

Growing electricity use and a tightening demand-supply market situation naturally raise electricity prices, which in turn encourages additional investments in electricity production. In a tightening market situation, and especially during challenging moments such as cold windless winter days, flexibility provided by data centers can significantly reduce price spikes.

In the scenario AFRY examined, where data center electricity use in 2030 is 2,500 MW, a 20% flexibility in data center demand would reduce the occurrence of the highest electricity price spikes significantly, and the annual average electricity price would also decline by more than €1/MWh in an average year. The benefit to the electricity users from cutting these highest price spikes would amount to €125 million. In a dry year, when there is less hydropower in the Nordic market, the impact is even greater. Flexibility offered by data centers could therefore be precisely the relief needed in exceptional, particularly challenging electricity market situations.

When considering the future of the electricity market design and, for example, the potential fossil-free flexibility support mechanism, it is important to take into account all opportunities that bring more flexibility to the market. For the national economy, the most cost-effective solutions should be identified and ensured that conditions for their implementation exist. The aim to control electricity prices by generally restricting investments that increase demand, does not seem like a reasonable goal in a situation where the horizon does not show strong economic growth for Finland.